Ever bottled up a dream because you know that what you can afford and what you want are two separate entities? It could have been owning that perfect house on the block, buying the latest car that's the current talk of the town, sending your kids to the best school, treating yourself to those once in a way ‘shop till you drop,' sprees or taking a sudden getaway trip… I'm sure many of you reading this have smiles on you faces because the reflection reminds you of similar instances that occur once too often. It doesn't happen to you alone, but to almost all of us. It is a common complaint, since for most of us our dormant paycheques leave us with little option…Let's take a break from reality and give ourselves a few thoughts for reconsideration. Let's talk about Unsecured Personal Loans.



Unsecured Personal Loans are Personal Loans that can be taken to serve any purpose – from consolidating debt, paying store and credit card bills, to taking that needed vacation. Unsecured Personal Loans do not necessitate collateral. Collateral is security that lenders demand when you apply for a loan. This collateral that is normally in the form of your home, your vehicle, your bank account or jewellery is placed in the lender's possession until you repay the entire amount. The fact that Unsecured Personal Loans do not require the very aspect that actually assures lenders of repayment, prepares you for the drawbacks that come hand in hand with the benefits.

• Unsecured Personal Loans do not require any collateral. This statement is completely true and involves no hidden clause.

• To compensate for the absent collateral, Unsecured Personal Loans involve higher interest rates. These rates also range between £7 and £30, but are higher than those offered on secured loans.

• Because of the level of risk involved, loan lenders rather the repayments come in as early as possible. This is why Unsecured Personal Loan terms are limited up to 10 years only.

• Given that the interest is higher and the loan term shorter, it is obvious that monthly or quarterly repayment instalments are going to be larger. This is the main drawback of Unsecured Personal Loans.

• Since the approvals of these loans are based on the repaying capability that you portray and also on your current financial position, loan lenders perform a credit check. (a credit check tells your lender about your past financial dealings – a late or incomplete loan repayment in the past, bankruptcies, arrears, C.C.J's, etc label you as a defaulter or someone with bad credit, while prompt repayments offer you a good credit score). Obviously, someone with bad credit is going to have a rough ride with Unsecured Personal Loans.

• As the time taken for valuation of collateral is eliminated, these loans are quicker to obtain, with shorter approval procedures.

For any loan there is no standard package - loan terms, amounts and rates will vary with your requirement, your financial standing and with the lender you approach. Unsecured Personal Loan amounts are normally limited to £25,000, while secured personal loans can go up to £75,000. However, this value differs from lender to lender. To get larger amounts approved, you can offer high-value collateral or reveal an exceptional credit statement. This is not impossible, all you have to do is make your repayments promptly and take only those loans that you really need.

It is clear that the drawbacks of Unsecured Personal Loans outnumber the benefits, but these loans are aimed only at those individual who have no collateral - like non homeowners, tenants or even those who choose not to offer any, to avoid any chance of confiscation in case of failure to repay.

Unsecured Personal Loans are more expensive than secured loans and therefore need careful contemplation before any decision is taken. When certain that you need an Unsecured Personal Loan, start shopping around for the right lender, the right rates and you'll be on your way to finding the right kind of money from the right Unsecured Personal Loan.